Margin Watch: Mid-March

March 15, 2010 by Chip Whalen

Hog
Margins showed a significant improvement since the end of February, particularly for the second half of 2010 and into 2011. Hog production margins are now above the 90th percentile of the past 5 years throughout 2010, meaning that producers have only seen higher profitability less than 10% of the time based on current projections. A combination of factors benefited hog producers over the past two weeks. The USDA released their monthly supply/demand report last week, and noted large increases for both U.S. domestic and world corn ending stocks. While soybean ending stocks declined domestically, the USDA noted a build in world ending stocks as larger South American crops for both corn… Get the Complete Report »

Dairy
Margins improved during the first half of March, and are now above breakeven in Q2 2010. While profitability is only average at best from a historical perspective, margins are nonetheless positive through Q1 2011 and offering opportunities for dairymen to avert the severe financial difficulties that were common in 2008 and 2009. Part of the reason for the improved margins stems from lower projected feed costs, as both corn and soybean meal prices have been under pressure from signs of an easing supply/demand balance heading into next year. The USDA noted increased corn and soybean production in South America which is helping to rebuild global stocks… Get the Complete Report »

Beef
Margins continued to improve during the first half of March, as a combination of lower feed costs and higher fed cattle prices helped to boost profitability for cattle producers. It appears that the firmer price trend in the cattle market is largely supply driven, as cattle carcass weights are currently running about 2.6% or 21 pounds below year-ago levels. Exports though have also been encouraging as January 2010 exports were about 16% above a year-ago, led by sales to Mexico. Meanwhile, the USDA released their monthly supply/demand estimates last week and noted an increase to both U.S. and world corn ending stocks. A large upward revision to Argentina’s production estimate caused the USDA… Get the Complete Report »

Corn
Crop margins deteriorated over the first half of March as futures have sold off nearly 30 cents since the end of February. A combination of rising prices and a stronger dollar began to pressure exports, and the USDA noted a reduced export projection in their recent WASDE report. While yield and production were lowered consistent with market expectations, exports declined 100 million bushels from February as Argentina’s production was increased almost 4 million tons from last month. The larger South American supply will intensify competition on the world market, with both domestic and world stocks forecast to build as a result. Basis held relatively steady over the past two weeks… Get the Complete Report »

Soybean
Crop margins deteriorated since the end of February as the futures market has been under pressure while basis values have held relatively steady. Expectations for increased supplies out of South America have contributed to the weaker prices as the global supply/demand balance begins to recover from the extremely tight levels noted this past year. The USDA raised their estimate for Brazil’s crop by 1 million tons from February following an increase for Argentina last month. While U.S. ending stocks were lowered due to a larger crush and export forecast, the focus appears to be shifting more to new-crop considerations… Get the Complete Report »

Wheat
Crop margins deteriorated since the end of February as a result of lower futures and a weaker basis. The futures market has sold off about 30 to 40 cents over the past two weeks as export demand has been non-existent. Intense competition from Russia in the world market is limiting U.S. wheat sales, allowing domestic stocks to build. The USDA raised U.S. wheat ending stocks to just over 1 billion bushels–the first time we have seen stocks above this threshold since 1987. World wheat stocks also increased as the USDA raised Argentina’s production and export projections from February. Given that both old-crop and new-crop margins remain negative, flexible… Get the Complete Report »

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